Automation in Australia can boost productivity to the level required to rekindle the country’s slowing economic growth, potentially adding over a trillion dollars to the economy, according to McKinsey.
But the technology could also put to 6.5 million full time jobs at risk, increase unemployment levels and further widen inequality.
The difference between prosperity or wide scale disruption will be how the “inevitable” automation is handled, McKinseys says. It is calling for immediate action from Australian stakeholders including competition reform as part of a national automation strategy.
Generally the management firm is bullish on the local automation opportunity, in its new report, Australia’s automation opportunity: Reigniting productivity and inclusive income growth, which claims to be the most in depth examination of Australia’s future of work.
The report says powerful new automation technologies such as machine learning, AI and advanced robotics are already transforming the Australian economy, workplace, education system and community.
McKinsey claims automation could add $1.2 trillion to the Australian economy in just over a decade, giving each Australian an additional $4,000 in income each year. A more “bold push” to rapidly automate would triple the benefits to $4 trillion and $11,000 respectively.
At its best — what McKinsey calls the “win-win scenario” — automation in Australia could “rekindle the kind of economic growth that delivers higher living standards and more choices for everyone” and offset Australia’s slowing economy.
McKinsey says reaching that outcome requires both an uptick in productivity and, importantly, that productivity being translated into wage gains. A trend that currently is not happening.
“If [Australia] fails in this task, we estimate that Australia’s economic growth could decline to an average of just 2.4 per cent through to 2030, and that per capita GDP growth could stagnate at the current low of 0.9 per cent.”
Data from the ABS shows the gap between company increasing company profits and worker wages is growing rapidly, suggesting on its current course, automation could be a big problem in Australia.
Jobs at risk
The disruptive impact of automation will put jobs at risk and force extensive retraining and up-skilling, according to the report. It estimates between 3.5 and 6.5 million full time jobs will be put at risk and up to 5 million workers will need need to change professions.
However, the report clarifies, “Fewer than 10 per cent of occupations could be fully automated and eliminated outright.”
A mid point adoption rate would have varying impacts depending on industry. For example, 16 per cent of education jobs would be disrupted while the rate jumps to 33 per cent for the transport industry.
The economy will adjust, however, according to McKinsey. New jobs will be created by the technology and requirements will shift, potentially lowering the barriers for traditional marginalised employment groups like women with children and the elderly.
But the positive outcomes require some foresight, the report says, and without intervention the overall impact will be negative.
“Left to its own devices, automation could have significant distribution impacts. During the peak of the transition, increased job churn could see Australia’s unemployment rate temporarily spike by up to 2.5 per cent (for example, from 5 to 7.5 per cent). Without retraining for vulnerable workers, especially administrative and manual workers and those in vulnerable regions, income inequality could widen by up to 30 per cent”.
The consultancy giant, which stands to benefit greatly from the complex integration of automation technology in Australia, is calling for action now to avoid the country falling further behind.
“We need to act now,” the authors write.
“Australia has lost its late 20th century reform momentum and is falling behind on innovation, digitisation and productivity compared to the rest of the world. Complacency and the instinct to protect the status quo, combined with an ageing population, put the economy at further risk. The longer we delay action, the more painful the consequences will be.”
McKinsey is calling for a national automation agenda, one which accelerates adoption while also promoting inclusion and support of workers.